The U.S. Securities and Exchange Commission (SEC) has proposed eliminating two core rules of Regulation National Market System (NMS), a move that could significantly reshape how tokenized U.S. equities trade across decentralized finance platforms. The plan targets Rules 611 and 610(e), in place since 2005, and opens a 60-day public comment period.
Proposed removal of key NMS rules
Rule 611, known as the trade-through rule, prevents trading venues from executing orders at prices worse than those available on other exchanges. Rule 610(e) prohibits locked or crossed markets, where bid and ask prices overlap or invert.
The SEC said removing these provisions would simplify market structure, reduce operational burdens, and allow competition and innovation to play a greater role. Chairman Atkins stated the effort is aimed at aligning regulations with modern trading technology and expanding access for new market models, including automated and decentralized systems.
Implications for tokenized equities
The proposal could address long-standing technical conflicts between current regulations and decentralized trading infrastructure. According to Thorn, head of firmwide research at Galaxy Digital, existing rules make it effectively impossible for automated market makers to legally support tokenized U.S. equities.
These systems cannot route orders based on external price feeds or halt execution to comply with national best bid and offer requirements. Removing the restrictions would allow greater reliance on FINRA Rule 5310, which requires brokers to pursue best execution but does not mandate centralized order routing. This shift could enable automated systems to manage price discovery and execution in a more flexible way.
Timeline and transitional measures
Seiberg, managing director at TD Cowen’s Washington Research Group, said the proposal is likely to move forward, with final rules potentially finalized by the first quarter of 2027. He added that interim exemptions could allow tokenization pilots to proceed before formal adoption.
Market growth and demand signals
The regulatory shift comes as tokenized real-world assets expand rapidly. Tokenized equities have reached an estimated market capitalization of $5.5 billion, up 147% over the past six months, with daily trading volumes climbing as high as $3.57 billion.
This growth highlights increasing demand for blockchain-based equity exposure and underscores the tension between legacy routing rules and decentralized execution models. The SEC’s proposal directly addresses these structural mismatches.
What traders should watch
The comment period offers market participants an opportunity to shape the outcome of the rule changes. Firms are already assessing how compliance systems and trading infrastructure would adapt to a framework based on best execution principles rather than strict routing requirements.
- Potential integration of automated market makers into regulated equity trading
- Shifts toward decentralized price discovery mechanisms
- Feedback from major financial institutions and technology providers
Despite the proposed rollback, tokenized equities will still face existing requirements around registration, clearing, and settlement. Thorn noted that these areas may later be addressed under a possible “innovation exemption” currently under consideration.
The outcome of this rulemaking process could mark a turning point for how U.S. equities interact with decentralized finance, but broader regulatory adjustments will likely be needed to fully integrate these emerging market structures.
Explore how regulation is evolving for tokenized stocks in DeFi with our guide on tokenized equities today.
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